Professional Documents
Culture Documents
It must be licit.
It must be possible.
It must be determinate or determinable.
It must have pecuniary value so that if not performed it is converted into damages.
4. Vinculum juris (legal tie).-- Upon default or refusal of the debtor to perform, the creditor can
go to court. When a person says "I promise to pay you when I like to," there is no obligation
here bec. there is no vinculum juris
All these first three four elements are agreed upon by commentators as essential elements.
The following two are being debated.
5. Causa debendi/ obligationes (Castan).-- This is what makes the obligation demandable.
This is the proximate why of an obligation.
6. Form.-- This is controversial. This is acceptable only if form means some manifestation of
the intent of the parties.
I. Sources of Obligations
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts
Balane: Law as a source of obligation.-- I am under the impression that all obligations are
derived from law. It is my opinion that there is an overlap in the enumeration bec. all obligations
arise from law. So, what is the idea of enumerating law as only one of the sources of an
obligation as if it is only one of them when the four find their sources in law? Is it true that law is
the only source of obligation? Yes and No. Yes, law is the only source of obligation if you talk
of it in the ultimate sense. No, if you are talking of law as a proximate source. In this case,
there are five sources of oblgations. Law is both the ultimate and a proximate source of
obligations.
Sources of Obligations according to Sanchez Roman.-- According to Sanchez Roman,
there are only 2 sources of obligations: Law and Acts. The latter are further classified, as
follows: (1) licit acts created by concurrence of wills (contracts); (2) licit acts either voluntary
or involuntary w/o concurrence of wills (quasi-contract); (3) illicit acts of civil character w/c are
not punishable, voluntary or involuntary (torts and all damages arising from delay); (4) illicit acts
w/c are voluntary and are punishable by law (crimes.)
SAGRADA ORDEN VS. NACOCO [91 P 503] - If def.-appellant (NaCoCo) is liable at all, its
obligations must arise from any of the 4 sources of obligations, namely, law, contract or quasi
contract, crime, or negligence. (Art. 1089, OCC.) Def.-appellant is not guilty of any offense at
all, bec. it entered into the premises and occupied it w/ the permission of the entity w/ch had the
legal control and admin. thereof, the Alien Prop. Admin. (APA) Neither was there any
Note: We now have a DTI regulation covering this situation. This is an administrative
regulation w/c has the force of law. But it would have been better to have placed this rule in a
law rather than in a mere administrative regulation.
Articles 1158 - 1162 specify the general principles regarding the sources of obligation
enumerated in Art. 1157.
Art. 1158. Obligations derived from law are not presumed. Only those expressly
determined in this Code or in special laws are demandable, and shall be regulated by the
precepts of the law which established them; and as to what has not been foreseen, by
the provisions of this Book.
Art. 2152. The officious manager is personally liable for contracts which he has
entered into with third persons, even though he acted in the name of the owner and third
persons. These provisions shall not apply:
(1) If the owner has expressly or tacitly ratified the management, or
(2) When the contract refers to things pertaining to the owner of the business.
Art. 2153. The management is extinguished:
(1) When the owner repudiates it or puts an end thereto;
(2) When the officious manager withdraws from the management subject to the
provisions of article 2144;
Art. 2144. Whoever voluntarily takes charge of the agency or management
of the business or property of another, without any power from the latter, is
obliged to continue the same until the termination of the affair and its incidents, or
to require the person concerned to substitute him, if the owner is in a position to
do so. xxx
(3) By the death, civil interdiction, insanity or insolvency of the owner or the
officious manager.
Art. 2172. The right of every possessor in good faith to reimbursement for
necessary and useful expenses is governed by article 546.
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Art. 2159. Whoever in bad faith accepts an undue payment, shall pay legal
interest if a sum of money is involved, or shall be liable for fruits received or which
should have been received if the thing produces fruits.
He shall furthermore be answerable for any loss or impairment of the thing from
any cause, and for damages to the person who delivered the thing, until it is recovered.
Art. 2160. He who in good faith accepts an undue payment of thing certain and
determinate shall only be responsible for the impairment or loss of the same or its
accessories and accessions insofar as he has thereby been benefited. If he has alienated
it, he shall return the price or assign the action to collect the sum.
Art. 2161. As regards the reimbursement for improvements and expenses
incurred by him who unduly received the thing, the provisions of Title V of Book II shall
govern.
Art. 2162. He shall be exempt from the obligation to restore who, believing in
good faith that the payment was being made of a legitimate and subsisting claim,
destroyed the document, or allowed the action to prescribe, or gave up the pledges, or
cancelled the guaranties for his right. He who paid unduly may proceed only against the
true debtor or the guarantors with regard to whom the action is still effective.
Art. 2163. It is presumed that there was a mistake in the payment if something
which had never been due or had already been paid was delivered; but he from whom the
return is claimed may prove that the delivery was made out of liberality or for any other
just cause.
(1) Distinguished from Natural Obligations
Art. 1423. Obligations are civil or natural. Civil obligations give a right of action to
compel their performance. Natural obligations, not being based on positive law but on
equity and natural law, do not grant a right of action to enforce their performance, but
after voluntary fulfillment by the obligor, they authorize the retention of what has been
delivered or rendered by reason thereof. Some natural obligations are set forth in the
following articles.
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B. Quasi-delicts
Art. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
Art. 2177. Responsibility for fault or negligence under the preceding article is
entirely separate and distinct from the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages twice for the same act or omission
of the defendant.
Art. 2180. The obligation imposed by article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are responsible for
the damages caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches in
which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent; but
not when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain in
their custody.
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
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Art. 636. Easements established by law in the interest of private persons or for
private use shall be governed by the provisions of this Title, without prejudice to the
provisions of general or local laws and ordinances for the general welfare.
These easements may be modified by agreement of the interested parties,
whenever the law does not prohibit it or no injury is suffered by a third person.
Art. 2014. No action can be maintained by the winner for the collection of what he
has won in a game of chance. But any loser in a game of chance may recover his loss
from the winner, with legal interest from the time he paid the amount lost, and
subsidiarily from the operator or manager of the gambling house.
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D. Contracts
Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
Art. 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
E. Delict
Art. 1161. Civil obligations arising from criminal offenses shall be governed by the
penal laws, subject to the provisions of article 2177, and of the pertinent provisions of
Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book,
regulating damages.
correlate this w/ Art. 100, RPC
Art. 100. Civil Liability of a person guilty of felony.-- Every person criminally
liable for a felony is also civilly liable.
Art. 108. Obligation to make restoration, reparation for damages, indemnification
for consequential damages and action to demand the same - Upon whom it devolves. The obligation to make restoration or reparation for damages and indemnification for
consequential damages devolves upon the heirs of the person liable.
The action to demand restoration, reparation, and indemnification likewise
descends to the heirs of the person injured. (Revised Penal Code.)
Art. 89. How criminal liability is totally extinguished. - Criminal liability is totally
extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary
penalties, liability therefor is extinguished only when the death of the offender occurs
before final judgment.
2. By service of the sentence;
3. By amnesty, which completely extinguishes the penalty and all its effects;
4. By absolute pardon;
5. By prescription of the crime;
6. By prescription of the penalty;
7. By the marriage of the offended woman, as provided in Article 344 of this Code.
(Id.)
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Balane: Crime as a source of obligation.-- There are many crimes from w/c, civil liability
arises in their commission, in addition to the criminal penalty attached to them. This underlines
the two aspects in a crime: one, as an offense against the state, and two as an offense against
the victim. It is in the latter case that civil liability is recoverable.
As far as crime is concerned, civil law is not concerned w/ the penal liability but only w/
the civil liab.
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Balane:
Negligence is the absence of something that should be there-- diligence.
Measure of Due Diligence.-- There are two guides:
(1) Diligence demanded by circumstances of person, place and time
(2) Care required of a good father of a family (fictional bonus pater familias who was the
embodiment of care, caution and protection in Roman law.)
In common law, the degree of care required is the diligence of a prudent businessman. This is
actually the same as the diligence of a good father of a family.
Effects of Negligence:
1. Creditor may insist on performance, specific or substitute (Art. 1233.)
2. Creditor may resolve/ rescind (Art. 1191.)
3. Damages in either case (Art. 1170.)
BALANE CASE:
JIMENEZ VS. CITY OF MANILA [150 S 510] - City of Mla. failed to exercise the diligence of a
good father of a family w/c is a defense in quasi-delict.-- As a defense against liability on the
basis of quasi-delict, one must have exercised the diligence of a good father of a family. There
is no argument that it is the duty of the City of Mla. to exercise reasonable care to keep the
public market reasonably safe for people frequenting the place for their marketing needs. While
it may be conceded that the fulfillment of such duties is extremely difficult during storms and
floods, it must, however, be admitted that ordinary precautions could have been taken during
good weather to minimize the dangers to life and limb under those difficult circumstances. For
instance, the drainage hole could have been placed under the stalls instead of on the passage
ways. Even more important is the fact, that the City should have seen to it that the openings
were covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it
was already uncovered, and 5 mos. after the incident happened, the opening was still
uncovered. Moreover, while there are findings that during floods the vendors remove the iron
grills to hasten the flow of water, there is no showing that such practice has ever been
prohibited, much less penalized by the City of Mla. Neither was it shown that any sign had been
placed thereabouts to warn passers-by of the impending danger.
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B. Common Carriers
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the
safety of passengers is further set forth in articles 1755 and 1756.
Art. 1734.
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
C. Lessee of Agricultural land
Art. 1680. The lessee shall have no right to a reduction of the rent on account of
the sterility of the land leased, or by reason of the loss of fruits due to ordinary fortuitous
events; but he shall have such right in case of loss of more than one-half of the fruits
through extraordinary and unforeseen fortuitous events, save always when there is a
specific stipulation to the contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence,
unusual flood, locusts, earthquake, or others which are uncommon, and which the
contracting parties could not have reasonably foreseen.
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Common Carrier
Art. 1763. A common carrier is responsible for injuries suffered by a passenger
on account of the wilful acts or negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the diligence of a good father of a
family could have prevented or stopped the act or omission.
2. Mora or default
a. Mora solvendi
Art. 1165. xxx.
xxx
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3. Express agreement
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36
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Balane:
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Balane:
Doctrines laid down in this case:
1. Right or resolution in Art. 1191 is impled.-- It is available even if there is no stipulation in the
contract. (This is not new; it merely reiterates what was laid down in Magdalena Estate v.
Myrick.)
2. Right of resolution may be exercised extrajudicially and will take effect upon communication
by the aggrieved party to the breaching party.
3. Exercise of this right is always subject to judicial review. It is up to the other party to go to
the court.
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the
the
will
the
the
Balane: Cases where the Courts may fix a period.-1. Art. 1197, par. 1
Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances
it can be inferred that a period was intended, the courts may fix the duration thereof.
xxx
Exceptions:
Article 1682. The lease of a piece of rural land, when its duration has not been fixed, is
understood to have been made for all the time necessary for the gathering of the fruits which the
whole estate leased may yield in one year, or which it may yield once, although two or more years
may have to elapse for the purpose.
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5. Art. 1180
Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the
obligation shall be deemed to be one with a period, subject to the provisions of article 1197.
BALANE CASES:
CHAVEZ V. GONZALES [32 SCRA 547] - Where obligation does not fix a period; When fixing
a period is mere formality.-- Where the def. virtually admitted non-performance by returning the
typewriter he was obliged to repair in a non-working condition, w/ essential parts, missing, he
cannot invoke Art. 1197 of the NCC. The time for compliance having evidently expired, and
there being a breach of contract by non-performance, it was academic for the pltff. to have first
petitioned the court fo fix a period for the performance of the contract before filing his complaint
in this case. The fixing of a period would thus be a mere formality and would serve no purpose
than to delay.
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ENCARNACION V. BALDOMAR [77 P 470] - The continuance and fulfillment of the contract
of lease cannot be made to depend solely and exclusively upon the free and uncontrolled
choice of the lessees bet. continuing paying the rentals or not, completely depriving the owner
of all say in the matter. For if this were allowed, so long as defs. elected to continue the lease
by continuing the payment of the rentals the owner would never be able to discontinue it;
conversely, although the owner should desire the lease to continue, the lessees could
effectively thwart his purpose if they should prefer to terminate the contract by the simple
expedient of stopping payment of the rentals. This, of course, is prohibited by art. 1256, NCC.
ELEIZEUI V. LAWN TENNIS CLUB [2 P309] - The term of a lease whose termination is
expressly left to the will of the lessee must be fixed by the courts according to the character and
conditions of the mutual undertakings, in an action brought for that purpose xxx.
PHILBANKING V. LUI SHE [21 SCRA 53] - A lease to an alien for a reasonable period is
valid.
LIM V. PEOPLE [133 SCRA 333] - It is clear in the agreement that the proceeds of the sale of
the tobacco should be turned over to the complainant as soon as the same was sold, or, that
the obligation was immediately demandable as soon as the tobacco was disposed of. Hence,
Art. 1197 of the NCC, w/c provides that the courts may fix the duration of the obligation if it does
not fix a period, does not apply.
ARANETA, INC. V. PHIL. SUGAR ESTATES [20 SCRA 330] - xxx Art. 1197 involves a twostep process. (1) The Court must first determine that "the obligation does not fix a period." (or
that the period is made to depend upon the will of the debtor)," but from the nature and the
circumstances it can be inferred that a period was intended." (2) This preliminary point settled,
the Court must then proceed to the second step, and decide what period was "probably
contemplated by the parties." So that, ultimately, the Court can not fix a period merely bec. in
its opinion it is or should be reasonable, but must set the time that the parties are shown to have
intended. xxx
MILLARE V. HERNANDO [151 SCRA 484] - Par. 1 of Art. 1197 is clearly inapplicable, since
the Contract of Lease did in fact fix an original period of 5 yrs., w/c had expired. It is also clear
from par. 13 of the contract that the parties reserved to themselves the faculty of agreeing upon
the period of the renewal contract. The 2nd par. of Art. 1197 is equally inapplicable since the
duration of the renewal period was not left to the will of the lessee alone, but rather to the will of
both the lessor and the lessee. Most importantly, Art. 1197 applies only where a contract of
lease clearly exists. Here, the contract was not renewed at all, there was in fact no contract at
all the period of w/c could have been fixed.
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Art. 1208. If from the law, or the nature or the wording of the obligations to which
the preceding article refers the contrary does not appear, the credit or debt shall be
presumed to be divided into as many equal shares as there are creditors or debtors, the
credits or debts being considered distinct from one another, subject to the Rules of
Court governing the multiplicity of suits.
Art. 1209. If the division is impossible, the right of the creditors may be
prejudiced only by their collective acts, and the debt can be enforced only by proceeding
against all the debtors. If one of the latter should be insolvent, the other shall not be
liable for his share.
Art. 1210. The indivisibility of an obligation does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility.
Distinguished from Solidary Obligations
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Art. 1915. If two or more persons have appointed an agent for a common
transaction or undertaking, they shall be solidarily liable to the agent for all the
consequences of the agency.
Baviera: Principals are always liable solidarily; Agents are not liable solidarily unless expressly
stipulated
(ii) Passive Solidarity
Art. 1216. The creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously. The demand made against one of them shall not be
an obstacle to those which may subsequently be directed against the others, so long as
the debt has not been fully collected.
BALANE CASES:
PNB V. INDEPENDENT PLANTERS [122 SCRA 113] - If one of the alleged solidary debtos
dies during the pendency of the collection case, the court where said case is pending retains
jurisdiction to continue hearing the charge as against the surviving defendants.-- It is crytal
clear that Art. 1216 is the applicable provision in this matter. Said provision gives the creditor
the right to proceed against anyone of the solidary debtors or some or all of them
simultaneously. The choice is undoubtedly left to the solidary creditor to determine against
whome he will enforce collection. In case of the death of the solidary debtors, he (the creditor)
may, if he so chooses, proceed against the surviving solidary debtors w/o necessity of filing a
claim in the estate of the deceased debtors. It is not mandatory for him to have the case
dismissed against the surviving debtors and file its claim in the estate of the deceased solidary
debtor.
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Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement
from his co-debtors if such payment is made after the obligation has prescribed or
become illegal.
Art. 1219. The remission made by the creditor of the share which affects one of
the solidary debtors does not release the latter from his responsibility towards the codebtors, in case the debt has been totally paid by anyone of them before the remission
was effected.
Balane: Effect of Remission.-- Problem: Solidary debtors W, X, Y & Z are indebted to A for
P12,000. A remits the share of Y (P3,000.)
Q: Can Y be sued?
A: Yes, for the P9,000 (P12,000 less P3,000 share of Y.)
Q: Supposing X is insolvent?
A: Y can still be made to contribute. Remission will benefit Y only in so far as his share
is concerned. His liability in case of insolvency of one co-creditor is not affected.
Q: Can A demand the P9,000 from Y.
A: Yes. But he can recover the same from W, X & Z.
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Art. 1220. The remission of the whole obligation, obtained by one of the solidary
debtors, does not entitle him to reimbursement from his co-debtors.
Art. 1221. If the thing has been lost or if the prestation has become impossible
without the fault of the solidary debtors, the obligation shall be extinguished.
If there was fault on the part of any one of them, all shall be responsible to the
creditor, for the price and the payment of damages and interest, without prejudice to
their action against the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or the performance has become
impossible after one of the solidary debtors has incurred in delay through the judicial or
extrajudicial demand upon him by the creditor, the provisions of the preceding
paragraph shall apply.
Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for
the non-fulfillment of the agency, and for the fault or negligence of his fellow agents,
except in the latter case when the fellow agents acted beyond the scope of their
authority.
Art. 1222. A solidary debtor may, in actions filed by the creditor, avail himself of
all defenses which are derived from the nature of the obligation and of those which are
personal to him, or pertain to his own share. With respect to those which personally
belong to the others, he may avail himself thereof only as regards that part of the debt for
which the latter are responsible.
Balane:
Three Defenses in Passive Solidarity:
1. Those derived from the nature of the obligation is a total defense, e.g., prescription, illegality
of obligation.
2. Those defenses personal to the debtor-defendant, e.g., insanity. If it involves vitiation of
consent, total defense. If it involves a special term or a condition, a partial defense.
3. Those defenses personal to other debtors, e.g., partial defense, is a defense as to the share
corresponding to other debtors.)
BALANE CASE:
UNIVERSAL MOTORS V. CA [205 S 448] - When the obligation of the other solidary debtors
is so dependent on that of their co-solidary debtor, the release of the one who appealed,
provided it be not on grounds personal to such appealing private resp. operates as well as to
the others who did not appeal. It is for this reason, that a decision or judgment in favor of the
private resp. who appealed can be invoked as res judicata by the other private respondents.
xxx It is obvious that the resp. court committed no error in ruling that its decision inures
to the benefit of all the private resps. regardless of the fact that only one appealed. It is
erroneous to rule that the decision of the trial court could be reversed as to the appealing prvate
resp. and continue in force against the other pvt. resps. The latter could not remain bound after
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4. According to Performance:
Indivisible and Divisible Obligations
Balane: This kind of obligations has something to do w/ the prestation, not to the thing.
Divisible obligation is one susceptible of partial performance. An indivisible obligation is
one that must be performed in one act.
General rule: Obligation is indivisible w/c means that it has to be performed in one act
singly. Why? Bec. the law provides so: Unless there is an express stipulation to that effect, the
creditor cannot be compelled partially to receive the prestations in which the obligation consists.
Neither may the debtor be required to make partial payments. xxx (Art. 1248, par. 1.)
Three Exceptions to the Rule on Indivisibility:
1. When the parties so provide. (Art. 1248, par. 1.)
2. When the nature of the obligation necessarily entails performance in parts.
3. Where the law provides otherwise.
Divisibility of Obligation distinguished from divisibility of object.-- Divisibility of obligation
or prestation does not necessarily mean a divisible obligation. Divisibility of object is not the
same as divisibility of obligation. But the reverse is not the same. Indivisibility of object means
an indivisibile obligation.
Art. 1223. The divisibility or indivisibility of the things that are the object of
obligations in which there is only one debtor and only one creditor does not alter or
modify the provisions of Chapter 2 of this Title (Nature and Effect of Obligations).
Art. 1224. A joint indivisible obligation gives rise to indemnity for damages from
the time anyone of the debtors does not comply with his undertaking. The debtors who
may have been ready to fulfill their promises shall not contribute to the indemnity
beyond the corresponding portion of the pice of the thing or of the value of the service in
which the obligation consists.
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Art. 2090. The indivisibility of a pledge or mortgage is not affected by the fact that the
debtors are not solidarily liable.
Art. 1612. If several persons, jointly and in the same contract, should sell an undivided
immovable with a right of repurchase, none of them may exercise this right for more than his
respective share.
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Art. 1226. In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of non-compliance, if there
is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor
refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code.
BALANE CASES:
BACHRACH V. ESPIRITU [52 P 346] - Art. 1152 of the OCC permits the agreement upon a
penalty apart from the interest. Should there be such an agreement, the penalty xxx does not
include the interest, and as such the two are different and distinct things w/c may be demanded
separately. The penalty is not to be added to the interest for the determination of whether the
interest exceeds the rate fixed by law, since said rate was fixed only for the interest.
ROBES-FRANCISCO V. CFI
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COUNTRY BANKERS V. CA [201 S 458] - A provision w/c calls for the forfeiture of the
remaining deposit still in the possession of the lessor, w/o prejudice to any other obligation still
owing, in the event of the termination or cancellation of the agreement by reason of the lessee's
violation of any of the terms and conditions of the agreement is a penal clause that may be
validly entered into. A penal clause is an accessory obligation w/c the parties attach to a
principal obligation for the purpose of insuring the performance thereof by imposing on the
debtor a special prestation (generally consisting in the payment of a sum of money) in case the
obligation is not fulfilled or is irregularly or inadequately fulfilled. As a general rule, in obligations
w/ a penal clause, the penalty shall substitute the indemnity for damages and the payment of
interests in case of non-compliance. This is specifically provided for in Art. 1226, par. 1. In
such case, proof of actual damages suffered by the creditor is not necessary in order that the
penalty may be demanded. xxx
But there are cases when both the penalty and the actual damages may be recovered,
such as when there is a stipulation to the contrary or when the obligor is guilty of fraud.
Balane: Country Bankers case is better than Pamintuan v. CA. Both the penalty and damages
are recoverable in exceptional circumstances. You do not merge the two.
SSS V. MOONWALK [221 S 119] - A penal clause is an accessory undertaking to assume
greater liability in case of breach. It has a double function: (1) to provide for liquidated
damages; and (2) to strengthen the coercive force of the obligation by the threat of greater
responsibility in the event of breach. From the foregoing, it is clear that a penal clause is
intended to prevent the obligor from defaulting in the performance of his obligation. Thus, if
there should be default, the penalty may be enforced.
Art. 1227. The debtor cannot exempt himself from the performance of the
obligation by paying the penalty, save in the case where this right has been expressly
reserved for him. Neither can the creditor demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this right has been clearly granted
him. However, if after the creditor has decided to require the fulfillment of the obligation,
the performance thereof should become impossible without his fault, the penalty may be
enforced.
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Art. 1228. Proof of actual damages suffered by the creditor is not necessary
inorder that the penalty may be demanded.
Baviera: Courts enforce contracts according to their terms
Art. 1229. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if there has
been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
Art. 1230. The nullity of the penal clause does not carry with it that of the principal
obligation.
The nullity of the principal obligation carrier with it that of the penal clause.
1. Distinguished from alternative obligations
Art. 1227. The debtor cannot exempt himself from the performance of the
obligation by paying the penalty, save in the case where his right has been expressly
reserved for him. Neither can the creditor demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this right has been clearly granted
him. However, if after the creditor has decided to require the fulfillment of the obligation,
the performance thereof should become impossible without his fault, the penalty may be
enforced.
Art. 1200. The right of choice belongs to the debtor, unless it has been expressly
granted to the creditor.
The debtor shall have no right to choose those prestations which are impossible,
unlawful or which could not have been the object of the obligation.
2. Distinguished from facultative obligations
Art. 1227. The debtor cannot exempt himself from the performance of the
obligation by paying the penalty, save in the case where this right has been expressly
reserved for him. Neither can the creditor demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time, unless this right has been clearly granted
him. However, if after the creditor has decided to require the fulfillment of the obligation,
the performance thereof should become impossible without his fault, the penalty may be
enforced.
Art. 1206. When only one prestation has been agreed upon, but the obligor may
render another in substitution, the obligation is called facultative.
The loss or deterioration of the thing intended as a substitute, through the
negligence of the obligor does not render him liable. But once the substitution has been
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A. Payment or Performance
Balane's Outline of the Articles on Payment:
Requisites of Payment or Performance:
I.
II.
III.
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Art. 1233. A debt shall not be understood to have been paid unless the thing or
service in which the obligation consists has been completely delivered or rendered, as
the case may be.
Art. 1234. If the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and complete fulfillment, less
damages suffered by the obligee.
BALANE CASES:
LEGARDA HERMANOS V. SALDANA [55 S 324] - The Court's doctrine in J.M. Tuason v.
Javier is fully applicable to the present case.
J.M. TUASON V. JAVIER [31 S 829] - In the interest of justice and equity, court may grant the
vendee a new term where he substantially performed in good faith according to Art. 1234,
regardless of Art. 1592 of the same Code.
PRESBITERO V. CA [217 S 372] - Under Art. 1234, if the obligation has been substantially
performed in GF, the obligor (private resp. Leonardo Canoso) may recover as though there had
been a strict and comlete fulfillment, less damages suffered by the obligee (Presbitero.)
Moreover, when the obligee accepts the performance as what happened in this case, knowing
its incompleteness or irregularity, and w/o expressing any protest or objection, the obligation is
deemed fully complied w/.
TAYAG V. CA [219 S 480] - Both the trial court and the appellate courts were correct in
sustaining the claim of pvt resps. anchored on estoppel or waiver by acceptance of delayed
payments under Art. 1235 considering that the heirs of Juan Galicia, Sr. accommodated pvt.
resp. by accepting the latter's delayed payments not only beyond the grace periods but also
during the pendency of the case for specific performance. Indeed, the right to rescind is not
absolute and will not be granted where where there has been substantial compliance by partial
payments. By and large, petitioners' actuation is susceptible of but one construction-- that they
are now estopped from reneging from their commitment on account of acceptance of benefits
arising from overdue accounts of pvt. resps.
Art. 1235.
When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or objection, the
obligation is deemed fully complied with.
BALANE CASES:
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Discussion:
1. Dacion en pago
Art. 1245. Dation in payment, whereby property is alienated to the creditor in
satisfaction of a debt in money, shall be governed by the law of sales.
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What are the rules to determine w/c is the most onerous debt?
1. If one is interest paying and the other is not, the debt w/c is interest paying is
more onerous.
2. If one is a secured debt and the other is not, the secured debt is more
onerous
3. If both are interest free, one is older than the first, the newer one is more
oneous bec. prescription will take longer w/ respect to the newer debt.
Fifth rule: Proportional application if the debts are equally onerous.
Art. 1252. He who has various debts of the same kind in favor of one and the
same creditor, may declare at the time of making the payment, to which of them the same
must be applied. Unless the parties so stipulate, or when the application of payment is
made by the party for whose benefit the term has been constituted, application shall not
be made as to debts which are not yet due.
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Art. 1266. The debtor in obligations to do shall also be released when the
prestation becomes legally or physically impossible without the fault of the obligor.
Balane: Objective and Subjective Impossibility.-- In objective impossibility, the act cannot
be done by anyone. The effect of objective impossibility is to extinguish the obligation. In
subjective impossibility, the obligation becomes impossible only w/ respect to the obligor. There
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BALANE CASES:
PEOPLE V. FRANKLIN [39 S 363] - Appelant now contends that the lower court should have
released it from all liability under the bail bond posted by it bec. its failure to produce and
surrender the accused was due to the negligence of the Phil. Govt itself in issuing a passport to
said accused, thereby enabling her to leave the country. In support of this contention, the
provisions of Art. 1266 are invoked.
HELD: Art. 1266, NCC does not apply to a surety upon a bail bond.-- Art. 1266 does not apply
to a surety upon a bail bond, as said Art. speaks of a relation bet. a debtor and creditor, w/c
does not exist in the case of a surety upon a bail bond, on one hand, and the State, on the
other. For while sureties upon a bail bond (or recognizance) can discharge themselves from
liability by surrendering their principal, sureties on ordinary bonds or commercial contracts, as a
general rule, can only be released by payment of the debt or performance of the act stipulated.
IMMACULATA V. NAVARRO [160 S 211] - We hereby grant said alternative cause of action
or prayer. While the sale was originally executed someting in Dec. 1969, it was only on Feb. 3,
1974 when, as prayed for by prvt. res, and as ordered by the court a quo, a deed of conveyance
was formally executed. Since the offer to redeem was made on 3/24/75, this was clearly w/in
the 5-yr. period of legal redemption allowed by the Public Land Act.
PNCC V. NLRC [193 S 401] - An obligor shall be released from his obligation when the
prestation has become legally or physically impossible without fault on his part..-- Petitioner
cannot be held liable for breach of contract for three reasons. xxx The second reason is found
in the rule that an obligor shall be released from his obligation when the prestation has become
legally or physically impossible w/o fault on his part. The supervening impossibility of
performance, based upon some factor independent of the will of the obligor, releases the obligor
from his obligation after restitution of what he may have received, if any, in advance from the
other contracting party; the obligor incurs no liability for damages for his inability to perform.
Art. 1267. When the service has become so difficult as to be manifestly beyond
the contemplation of the parties, the obligor may also be released therefrom, in whole or
in part.
Balane: Rebus sic stantibus.-- Literally means "things as they stand." It is short for clausula
rebus sic stantibus ("agreement of things as they stand.") This is a principle of international law
w/c holds that when 2 countries enter into a treaty, they enter taking into account the
circumstances at the time it was entered into and should the circumstances change as to make
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Acceptance must be made during the lifetime of the donor and of the
donee.
Art. 752. The provision of article 750 notwithstanding, no person may give or
receive, by way of donation, more than he may give or receive by will.
The donation shall be inofficious in all that it may exceed this limitation.
Art. 750. The donation may comprehend all the present property of the
donor, or part thereof, provided he reserves, in full ownership or in usufruct,
sufficient means for the support of himself, and of all relatives who, at the time of
the acceptance of the donation are by law entitled to be supported by the donor.
Without such reservation, the donation shall be reduced on petition of any person
affected.
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Art. 749. In order that the donation of an immovable may be valid, it must be made
in a public document, specifying therein the property donated and the value of the
charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notifed
thereof in an authentic form, and this step shall be noted in both instruments.
2. Presumption of Condonation
Balane: Articles 1271 and 1272 refer to a kind of implied renunciation when the creditor divests
himself of the proof credit. According to De diego, this provision is absurd and immoral in that it
authorizes the debtor and his heirs to prove that they paid the debt, when the provision itself
assumes that there has been a remission, w/c is gratuitous. (Tolentino.)
Art. 1271. The delivery of a private document, evidencing a credit, made
voluntarily by the creditor to the debtor, implies the renunciation of the action which the
former had against the latter.
If in order to nullify this waiver it should be claimed to be inofficious, the debtor
and his heirs may uphold it by providing that the delivery of the document was made in
virtue of payment of the debt.
Limited to Private Document.-- Art. 1271 has no application to public documents bec. there is
always a copy in the archives w/c can be used to prove the credit.
Private document refers to the original original in order for Art. 1271 to apply. (TransPacific. v. CA, supra.)
BALANE CASES:
TRANS-PACIFIC V. CA [234 S 494] - It may not be amiss to add that Art. 1271 raises a
presumption, not of payment, but of the renunciation of the credit where more convicing
evidence would be required than what normally would be called for to prove payment. The
rationale for allowing the presumption of renunciation in the delivery of a private instrument is
that, unlike that of a public instrument, there could be just one copy of the evidence of credit.
Where several originals are made out of a private document, the intendment of the law would
thus be to refer to the delivery only of the original original rather than to the original duplicate of
w/c the debor would normally retain a copy. It would thus be absurd if Art. 1271 were to be
applied differently.
Art. 1272. Whenever the private document in which the debt appears is found in
the possession of the debtor, it shall be presumed that the creditor delivered it
voluntarily, unless the contrary is proved.
Rule 131, Sec. 5 (b), (j), (k), Rules of Court.
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Art. 1216. The creditor may proceed against any of one of the solidary debtors or
some or all of them simultaneously. The demand made against one of them shall not be
an obstacle to those which may subsequently be directed against the others, so long as
the debt has not been fully collected.
Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may choose which
offer to accept.
He who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the payment is
made before the debt is due, no interest for the intervening period may be demanded.
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FRANCIA V. IAC [162 S 753] - [T]here can be no off-setting of taxes against the claims that
the taxpayer may have against the govt. A person cannot refuse to pay a tax on the ground that
the govt owes him an amount equal to or greater than the tax being collected. The collection of
a tax cannot await the results of a lawsuit against the govt.
A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be
set-off xxx The general rule based on grounds of public policy is well-settled that no set-off
admissible against demands for taxes levied for general or local governmental purposes. The
reason on w/c the gen. rule is based, is that taxes are not in the nature of contracts bet. the
party and party but grow out of duty to, and are the positive acts of the govt to the making and
enforcing of w/c, the personal consent of individual taxpayers is not required. xxx (Republic v.
Mambulao Lumber.)
In Cordero v. Gonda, we held that: "xxx internal revenue taxes can not be the subject of
compensation: Reason: govt and taxpayer 'are not mutually creditors and debtors of each other
under Art. 1278 and a "claim for taxes is not such a debt, demand, contract or judgment as is
allowed to be set-off.
Art. 1286. Compensation takes place by operation of law, even though the debts
may be payable at different places, but there shall be an indemnity for expenses of
exchange or transportation to the place of payment.
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BALANE CASES:
REPUBLIC V. DE LOS ANGELES [98 S 103] - Compensation of debts arising even without
proof of liquidation of claim, where the claim is undisputed.-- Proof of the liquidation of a claim,
in order that there be compensation of debts, is proper if such claim is disputed. But, if the
claim is undisputed, as in the case at bar, the statement is sufficient and no other proof may be
required. xxx
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BALANE CASE:
MINDANAO PORTLAND CEMENT V. CA [120 S 930] - Automatic compensation, requisites
of, present; Extinguishment of two debts arising from final and executory judgments due to
compensation by operation of law.-- It is clear from the record that both corporations, petitioner
Mindanao Portland Cement Corp. (appellant) and resp. Pacweld Steel Corp. (appellee), were
creditors and debtors of each other, their debts to each other consisting in final and executory
judgements of the CFI in 2 separate cases, ordering the payment to each other of the sum of
P10T by way of attorney's fees. The 2 obligations, therefore, respectively offset each other,
compensation having taken effect by operation of law and extinguished both debts to the
concurrent amount of P10T, pursuant to the provisions of Art. 1278, 1279 and 1290, since all
the requisites provided in Art. 1279 for automatic compensation "even though the creditors and
debtors are not aware of the compensation" were duly present.
b. Facultative Compensation w/c takes place when compensation is claimable by only
one of the parties but not of the other, e.g., Articles 1287, 1288.
Art. 1287. Compensation shall not be proper when one of the debts arises from a
depositum or from the obligations of a depositary or of a bailee in commodatum.
Neither can compensation be set up against a creditor who has a claim for
support due by gratuitous title, without prejudice to the provisions of paragraph 2 of
article 301.
Art. 301. The right to receive support cannot be renounced; nor can it be
transmitted to a third person. Neither can it be compensated with what the
recipient owes the obligor.
However, support in arrears may be compensated and renounced, and the
right to demand the same may be transmitted by onerous or gratuitous title.
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BALANE CASE:
SESBRENO V. CA [222 S 466] - Compensation may defeat assignee's rights before notice of
the assignment is given to the debtor.-- In other words, petitioner notified Delta of his rights as
assignee after compensation had taken place by operation of law bec. the offsetting instruments
had both reached maturity. It is a firmly settled doctrine that the rights of an assignee are not
any greater than the rights of the assignor, since the assignee is merely substituted in the place
of the assingor and that the assignee acquires his rights subject to the equities-- i.e., the
defenses-- w/c the debtor could have set up against the original assignor before notice of the
assingment was given to the debtor. At the time that Delta was first put to notice of the
assingment in petitioner's favor on 7/14/81, DMC PN NO. 2731 had already been discharged by
compensation. Since the assignor Philfinance could not have then compelled payment anew by
Delta of DMC PN No. 2731, petitioner, as assignee of Philfinance, is similarly disabled from
collecting from Delta the portion of the Note assigned to him.
(not in Baviera's outline)
Art. 1284. When one or both debts are rescissible or voidable, they may be
compensated against each other before they are judicially recsinded or avoided.
G. Novation
Concept of Novation.-- Novation is the extinguishment of an obligation by the substitution or
change of the obligation by a subsequent one w/c extinguishes or modifies the first, either by
changing the object of principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor. (Manresa.)
Novation is the most unusual mode of extinguishing an obligation. It is the only mode
whereby an obligation is extinguished and a new obligation is created to take its place. The
other modes of extinguishing an obligation are absolute in the sense that the extinguishment of
the obligation is total (w/ the exception of compromise.) Novation, on the other hand, is a
relative mode of extinguishing an obligation.
Classification of Novation:
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Subjective Novation
a. In case of active subjective novation (Art. 1300-- subrogation):
Art. 1300. Subrogation of a third person in the rights of the creditor is either legal
or conventional. The former is not presumed, except in cases expressly mentioned in
this Code; the latter must be clearly established in or order that it may take effect.
(i) Legal (Art. 1302)-- In all cases of Art. 1302, subrogation takes place by
operation of law.
Art. 1302. It is presumed that there is legal subrogation:
(1) When a creditor pays another creditor who is preferred, even without the
debtor's knowledge;
(2) When a third person, not interested in the obligation, pays with the express or
tacit approval of the debtor;
(3) When, even without the knowledge of the debtor, a person interested in the
fulfillment of the obligation pays, without prejudice to the effects of confusion as to the
latter's share;
(ii) Conventional/ Contractual (Art. 1301)-- Consent of the 3 parties (old creditor,
debtor and new creditor) are required.
Art. 1301. Conventional subrogation of a third person requires the consent of the
original parties and of the third person.
Q: Is it possible for a creditor to transfer his credit w/o consent of the debtor?
A: Yes. But this is not novation bu an assignment of rights under Art. 1624.
Assignment is also a novation but much simpler. But is not subrogation.
(1) Kinds
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BALANE CASE:
RODRIGUEZ V. REYES [37 S 195] - By buying the property covered by TCT No. 48979 w/
notice that it was mortgaged, resp. Dualan only undertook either to pay or else allow the land's
being sold if the mortgage creditor could not or did not obtain payment from the principal debtor
when the debt matured. Nothing else. Certainly, the buyer did not obligated himself to replace
the debor in the principal obligation, and he could not do so in law w/o the creditor's consent.
(Art. 1293)
The obligation to discharge the mortgage indebtedness therefore, remained on the
shoulders of the original debtors and their heirs, petitioners herein, since the record is devoid of
any evidence of contrary intent. xxx
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